Cost differences between hospice and nonhospice care. A comparison of insurer payments and provider charges

Although it has been postulated that hospice care savings are "biased" when costs are measured in terms of insurer payments instead of provider charges, this claim has not been documented by research. This article examines cost differences between hospice and nonhospice care, first, by analyzing Medicare Part A payments and, second, by studying provider charges for services rendered to a population of 24 cancer patients during their last 24 weeks of life. The exploratory results of the study showed that although the cost savings derived from analyzing provider charges were about double those based on Medicare Part A payments, both approaches to the measurement of cost strongly indicated that hospice home care was less costly than nonhospice care. Further analysis showed that variations in the rates of Medicare reimbursement accounted for 22 to 42% of the differences in the derived cost savings between the two approaches to measuring cost, and that payments to hospitals played a major role in determining this outcome.